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363
 
8.Economy
 
8.1GENERALBACKGROUND&OVERVIEW
 With the establishment of the PA in 1994, numerous economic and development projects were initiated, but the WBGS arestill totally dependent on support from outside. Palestinian economy is dominated by services, while industry remainsunderdeveloped and at a low level, and the agricultural sector from the lack or restrictive access to natural resources.The main reason behind the current economic crisis is the general
closure and separation policy
imposed by Israel inMarch 1993, which has never been lifted since. In violation of international law, the closure is used as collective punishmentagainst the Palestinian people, preventing WBGS residents from entering Jerusalem or Israel unless they hold an Israeli-issuedpermit. Any sustained Palestinian economic recovery will ultimately require the dismantling of the closure system.The economic restrictions have remained and the situation in Gaza continues to deteriorate. The PCBS estimates that
real
 
GDP growth
in the WBGS in 2007 was 0.5%, while IMF analysis notes a drop in GDP of -0.5% in 2007 and modest growthof 0.8% in 2008.
(The World Bank.
Palestinian Economic Prospects: Aid, Access and Reform.
Sept. 2008.)
 With a growing population and a shrinking economy, real
per capita GDP
is now 30% below its height in 1999; had theannual growth trend of an average 6% from 1994-1999 continued, GDP per capita would nearly be 85% higher than it iscurrently.
(The World Bank.
Palestinian Economic Prospects: Aid, Access and Reform.
Sept. 2008.)
 Economic progress has been insufficient to stimulate growth in the OPT because of the restrictions on movement, whiledependency on aid was increasing. Approx. half of all Palestinian households are dependent on
food assistance
providedby the international community (80% of households in Gaza, 33% in the WB).
 
(ILO,
The Situation of Workers of the Occupied  Arab Territories 
. May 2008.)
Key Indicators of the Palestinian Economy (Excl. Jerusalem, selected years)
 
1995 1999 2002
 
2003 2004
1
 
2005
1
 
2006
2
 
2007
3
 
GDP (US$ million) 3,276 4,517 3,156 3,624 4,007 4,478 4,533 5,045GNI (US$ million) 3,799 5,454 3,546 4,105 4,534 5,017 5,068 5,620GDP per capita (US$) 1,400 1,590 999 1,108 1,203 1,191 1,165 1,261GNI per capita (US$) 1,615 1,920 1,122 1,255 1,337 1,334 1,303 1,405Real GDP growth (%) 6.1 8.6 -3.8 5.8 6.0 6.0 -4.8 0.0Real GNI per capita growth (%) 7.9 4.1 -8.9 6.2 1.5 -1.0 -14.9 -0.7Domestic expenditure (% of GDP) 151.8 163.0 145.8 150.2 150.7 154.5 173 -Inflation (CPI - annual %) 10.8 5.5 5.7 4.4 3.0 3.6 3.6 -Poverty rate
4
(% of population)West Bank:Gaza Strip:2013325141684737644838652247.919.151.8
1
Revised;
2
preliminary;
3
estimates
4
World Bank estimatesSource: UNCTAD
.
 
Report on UNCTAD’s Assistance to the Palestinian People 
. July 2007, except:
 4
World Bank estimates.
 
PCBS uses two measures of 
poverty
: Deep Poverty (absolute) and Poverty. The DeepPoverty line reflects a budget for food, clothing and housing only. For a family of six itwas NIS 1,837 in 2006. The Poverty line adds other necessities, incl. health care,education, transportation, personal care and housekeeping supplies; raising the line toNIS 2,300 for a family of 6. In 2007, the Deep Poverty rate was 69.9% in Gaza and34.1% in the West Bank.
 
 According to OCHA, the income-based poverty rate was 57% in 2006 while the 44%lived in absolute poverty.
(OCHA, 2008).
 
 
 A Sept. 2008 IMF report states that
unemployment
in Gaza was over 30% and
inflation
18%, with at least 79% of the population living below the
poverty line
.
 
By mid-2008,
inflation
was projected by the World Bank to be about 9.5% (ascompared to the expected 4%)
 
 
364
 
WBGS Economic Structure, 2007 (% of GDP)
 
Source: PCBS,
Quarterly National Accounts 
, 2008 (Jerusalem excluded).
 
Consumer Price Index (Yearly Averages)
8.2AGRICULTURE
 
The Agricultural Sector at a Glance
WBGS
Total Cultivated area (dunums) (2007) 1,834,851 Agricultural land as % of total land area (2006)- of which irrigated25.210.7 Area of fruit trees (2007)- as % of total cultivated area1,164,56262% Area of field crops (2007)- as % of total cultivated area482,49427.2% Area of vegetables (2006)- as % of total cultivated area187,34410.5% Area of cut flowers (2007) 451No. of cattle (2007) 34,255No. of sheep (2007) 744,764No. of goats (2007) 343,565No. of poultry (2005) 43,197No. of beehives (2003/04) 59,946No. of plant nurseries (2005) 197
 Agriculture & Fishing, 8.2%Mining,Manufacturing,Electricity & Water, 12.7%Construction,2.5%Wholesale andRetail Trade,10%
 
Transportation,Storage,Communications,11.6%Other Services,21.9%Financial Inter-mediation, 4.7%Public Admin. & Defense, 13.5%
99.6119.78122.99127.7133.32107.86123.5899.8120.95123.32136.14149.71109.71117.6799.74120.23127.34140.88149.15109.06120.7999.66119.93124.79137.73152.09109.28120.66
0 20 40 60 80 100 120 140 160
199519992001200320052007Oct.2008
TotalWest Bank JerusalemGaza
(Source: PCBS, various years.)
 
Source: PCBS,
 Agricultural Statistics 
, 2006/07, previous years.
 
 
365
 
 
 As of Sept. 2008, 14.9% of the
employed persons
in the WBGS were working in agriculture, fishing and forestry
(PCBS,
Labor Force Survey 
, July-Sept. 2008).
 
In the first quarter of 2008, Agriculture and Industry combined were approx. 19% of 
GDP
(as compared to 25% in1999).
(The World Bank.
Palestinian Economic Prospects: Aid, Access and Reform.
Sept. 2008.)
 
Sealing off the Gaza Strip was especially harmful, as its agricultural sector and many of its industries are export-oriented.Only one fifth of its two main export products - carnations and strawberries – was exported in 2007 while the remainderwas used as animal feed, resulting in some $6.5 million in losses for carnation farmers and US$7 million for strawberryexporters million.
(UNCTAD.
Report on UNCTAD’s Assistance to the Palestinian People 
. July 2008).
 
 
The sector generates approx. 25% of all Palestinian
exports
; major export goods are fruits, olives and olive oil, vegeta-bles and cut flowers. The sector suffers from the lack of access to markets (Israeli export companies still control thequantity and the quality of Palestinian agricultural commodities), and restricted water resources.
 
 Approx. 900,000 dunums are planted with 10 million
olive
trees, constituting 45% of cultivated land and contributing 15-19% of agriculture output. In 2008, some 128,000 metric tons of olives were estimated to be picked and 32,000-35,000metric tons of olive oil were expected to be produced. (
UN,
The Olive Harvest in the West Bank and Gaza Strip,
Oct. 2008)
.
 
In 2007, there were 6,976
agricultural establishments
operating.
(PCBS,
Establishment Census 
, 2007).
 
 
In 2005, Gaza’s 2,998
fishermen
- operating
 
707 boats - caught some 1,818.3 tons of 
fish
, mainly sardines.
(PCBS,
 Agricultural Statistics 
, 2006).
 
 
Due to the
separation barrier
important areas of land and water resources are becoming increasingly difficult to bringinto production, affecting some 170,000 dunums of 
fertile agricultural lands
or 10.2% of the total area cultivated inthe West Bank, with an average economic value of US $38 million – equal to roughly 8% of Palestinian agricultureproduct
(World Bank,
The Economic Effects of Restricted Access to Land in the West Bank,
Oct. 2008)
 
 
The halt in exports and the prohibition on importing fertilizer, pesticides, packaging materials and other inputs has led tothe
loss
of more than 40,000
 jobs
in the agriculture sector. PalTrade estimates total
agricultural export losses
at US$30 million in the 2007/2008 season.
(World Bank,
West Bank and Gaza Update 
, Oct. 2008).
 
 
It is estimated that as a result of the
construction of the separation barrier
some 15% of West Bank agricultural landwill be lost
(UNCTAD, 2008).
8.3INDUSTRY&PRIVATESECTOR
 
Facts & Figures
 
The
industrial
sector’s share of the Palestinian
GDP
was estimated at 14% in mid-2008 (manufacturing: 11.3%, mining/quarrying: 0.5%, construction: 2.7%) and itsshare in total
employment
at 12.3% (1995: 17.5%)
(PCBS.
Quarterly National  Accounts 
. 2008).
 
 At the end of 2007, the share of the
GDP
of 
manufacturing, mining & quarrying
was estimated at 10.9%, that of 
construction
at
 
2% that of 
transport, storage & communications
at 12.1% and that of 
services
(health, education, social, real estate,business,
 
hotel & restaurants) at 24.5%
(PCBS.
Quarterly National Accounts 
. 2008).
 
In the first quarter of 2008, Agriculture and Industry combined were approx. 19% of 
GDP
(as compared to 25% in1999).
(The World Bank.
Palestinian Economic Prospects: Aid, Access and Reform.
Sept. 2008.)
 
While employment in services consistently increases,
employment in industry and construction is declining
, whichis particularly apparent in Gaza, where it declined from 21% of total employment in 2000 to 7% by the end of 2007.
 
(ILO,
The Situation of Workers of the Occupied Arab Territories 
. International Labor Conference, May 2008.)
 
Especially
Gaza
suffers from severe
capacity
 
underutilization
owing to the lack of access to inputs and markets. According to World Bank research, 96% of the 3,900
industrial establishments
that existed in Gaza June 2007,employing 35,000 workers, have been forced to close.
 
Consistent with the lack of borrowing,
industrial output
continues to decline. According to PCBS estimates, in 2007manufacturing output was approx. 1.8% lower than in 2006 and nearly 23% off from 1999.
 
In 2007, there were 132,874
establishments
in the WBGS, excl. Jerusalem (WB: 94,205 or 70.9%; GS: 38,669 or29.1%), implying a 34.1% increase compared to 1997. Some 116,804 of the total are
operating
(WB: 82,871 GS: 33,933),while 3,657 are completely and 5,130 temporarily closed, 638 are under preparation, and 6,645 are auxiliary units.
(PCBS,
Establishment Census,
2007).
 
CompletelyClosed2.7%TemporarilyClosed3.9%UnderPreparation0.5% Auxiliary Unit5.0%In Operation87.9%
Establishments by Operation Status
(Source: PCBS, Establishment
of 00

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